Gains from Early Support of a New Political Party

We study the benefits of political connections on firm performance by analyzing the effects of the early support to Silvio Berlusconi, a TV tycoon who in three months in 1993 founded a party, won the elections and became Italy’s Prime Minister. We find that the 101 companies who supported Berlusconi from the start did better than controls in terms of sales and employment, while the effects on productivity are less clear-cut. Results are confirmed when we instrument the decision to support Berlusconi with electoral outcomes in the 1921 Italian elections, which had similarities both in terms of electoral voting and ideological competition. We also find suggestive evidence that the supporters’ superior performance is stronger in sectors with high advertising intensity.